Utility Operations: Will Blockchain Become the New Standard for Energy Trading?

Recently, a colleague asked me whether the electric utility industry will adopt blockchain technology. My colleague brought this up because of the recent news coverage around cryptocurrencies. My reaction was, first, technology needs to solve a problem, so let’s talk about the problem. In 2008, during the financial crisis, $19.2 trillion of wealth evaporated. People lost trust in financial institutions. In August that year, Bitcoin was born to solve the trust problem. Blockchain is the platform used to enable cryptocurrencies.

Blockchain is a trust machine because data are managed by multiple decentralized firms. Today, data transactions rely on digital signatures that depend on asymmetric key cryptography, which itself relies on a common trust factor from the sources performing verification. Blockchain is about truth, not trust, because it allows for accountability and visibility of the data by anyone involved in the transaction.

Blockchain also allows for data providence. For example, if there was a food-safety concern, Wal-Mart would have visibility to the entire supply chain to identify the source of that problem. It’s like opening Russian Dolls that are full of data.

So what problem would blockchain technology solve for electric utilities? The answer involves transactive energy. The U.S. is becoming a nation where customers are installing behind-the-meter generation, and they want to be able to use the utility as a platform to sell their power. The intent of transactive energy would be to have “smart contracts” where utility customers have access to the wholesale market.

Today, blockchain technology is moving faster than regulatory change. As a result, a regulatory framework is lacking for blockchain to facilitate transactive energy. Today, a license is required to sell in the consumer-to-consumer or consumer-to-wholesale market. Tracking and trading renewable energy certificates requires an approved tracking system. Blockchain is NOT approved. Regulators today are not focused on blockchain because they see it as technology far out into the future. The first formal U.S. blockchain energy docket opened on July 16, 2018, in Arizona, and it includes the Internet of Things, transactive energy, and cyber security.

To answer my colleague’s question, it will take time before electric utilities adopt blockchain. Some utilities are starting to pilot, such as NV Energy, but the business models must be better defined and the regulatory frameworks still must be developed before blockchain can make any major progress for utility use.

I’d be interested in learning your thoughts on how your utility might benefit from blockchain technology in the Comments below.